Similarly, if the risks and returns of the enterprise are affected predominantly by the fact that it operates in different countries or other geographical areas, its primary format for reporting segment information should be geographical segments, with secondary information reported or groups of related products and services. Scope : For General Purpose Financial Statements or Consolidated Financial Statements. Segment liabilities do not include borrowings and other liabilities that are incurred for financing rather than operating purposes. 10 crores during a a given accounting period, holding and subsidiary entreprises of any of the above during a given accounting period, fraction of entreprise revenue directly attributable to a segment, portion of entreprise revenue that can be allocated on a reasonable basis to a segment, revenue from transactions with other segments of the enterprise, expense resulting from the operating activities of a segment directly attributable to the segment, portion of entreprise expense that can be allocated on a reasonable basis to the segment including expense related to transactions with other segments of the entreprise, operating assets employed by a segment in its operating activities and, are either directly attributable to a segment or can be allocated to a segment on a reasonable basis, operating liabilities employed by a segment in its operating activities of a segment and, The primary format for reporting segment information should be business segments if the risks and returns of an entreprise are majorly impacted by variations in the products and services it produces, The primary format for reporting segment information should be geographical segments if the risks and returns of an entreprise are majorly impacted by the geographical areas in which it operates. Its predominant source of risks and returns becomes its primary segments reporting format. It is revenue from sales made to external customers as reported in profit and loss statement. Before publishing your articles on this site, please read the following pages: 1. A segment identified as a reportable segment in the immediately preceding period because it satisfied the relevant 10 per cent thresholds should continue to be a reportable segment for the current period notwithstanding that its revenue, result, and assets all no longer meet the 10 per cent thresholds. Provided the revenue from sales to external customers for each geographical segment is 10% or more of entreprise revenue, total carrying amount of segment assets by geographical location of assets provided the segment assets for each geographical segment are 10% or more of the total assets of all geographical segments, total cost incurred during the period to acquire segment assets expected to be used for more than one period by geographical location of assets. AS 17 Segment Reporting Summary Notes. 30. Require the disclosures in Topic 280, Segment Reporting, to be reported in a … The factors in paragraph 5 for identifying business segments and geographical segments are not listed in any particular order. The requirements of this Statement are also applicable in case of consolidated financial statements. Following are the important Accounting Standards related with Segment Reporting 1. 36. Segment accounting policies are the accounting policies adopted for preparing and presenting the financial statements of the enterprise as well as those accounting policies that relate specifically to segment reporting. 35. The objective of this statement is to establish principles for reporting financial information, about different types of products and services an enterprise produces and the different geographical areas in which it operates. Here turnover does not include other income, entreprises having borrowings including public deposits exceeding Rs. 1. The accounting standard helps readers grasp the well-being of the enterprise, assess the risks involved, and make better informed decisions about the enterprise as a whole. AS-17: Segment Reporting: Applicability of Accounting Standard: Applicable to Level I Enterprises. Accounting standard 17 deals with segment reporting that was established to help better understand performance risk and returns of an enterprise. 3. 8. AS 17, on segment reporting is mandatory in respect of accounting periods commencing on or after 1-4-2001 in respect of enterprises (a) whose equity or debt securities are listed on a stock exchange in India or in process of listing on stock exchange or (b) all other enterprises whose turnover for the accounting period exceeds Rs. The 10 per cent thresholds in this Statement arc not intended to be a guide for determining materiality for any aspect of financial reporting other than identifying reportable business and geographical segments. Therefore, the organisational structure of an enterprise and its internal financial reporting system are normally the basis for identifying its segments. Segment Liabilities. Professional bodies all over the world have issued various accounting standards on segment reporting like AS-14 in Hong Kong, SFAS-31 by FASB in USA, 1FRS-8 Operating Segments by IASB at international level. Disclosure of segment cash flow is, therefore, encouraged, though not required. AS 17 Segment reporting (An Overview) By Narayanan. The reporting requirements for the primary and secondary segments are different. For example, an asset is included in segment assets if, and only if, the related depreciation or amortisation is included in segment expense. Assets and liabilities that relate jointly to two or more segments should be allocated to segments if, and only if, their related revenues and expenses also are allocated to those segments. If a change is made in the accounting policies which has no material effect on the financial statements for the current period but which is reasonably expected to have a material effect in later periods, the fact of such change should be appropriately disclosed in the period in which the change is adopted. Segment assets do not include income tax assets. 15. AS-17 – Segment Reporting : The objective of this standard is to establish principles for reporting financial information, about the different types of products and services an enterprise produces and the different geographical areas in which it operates. 2. Latest edition: KPMG’s updated guidance on and interpretation of ASC 280, Segment Reporting – with analysis, Q&As and examples. (c) Make more informed judgments about the enterprise as a whole. It states that, the enterprise should prepare its segment report on the basis of operating segments which have determined by its key decision makers (i.e. (ii) The relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment, and. Factors that should be considered in determining whether products or services are related include: (a) The nature of the products or services; (b) The nature of the production processes; (c) The type or class of customers for the products or services; (d) The methods used to distribute the products or provide the services; and. Try QuickBooks Invoicing & Accounting Software – 30 Days Free Trial. If Financial report contains both, then on the basis of CFS. 46. In this article you will learn different ways in which an entreprise can take segment reporting, identifying reportable segments, business and geographical segments, reportable segments etc. Content Guidelines 2. The nature of segment reporting issues for not-for-profit entities are different from those facing for-profit entities. This Statement does not require, but does not prohibit, a ‘matrix presentation’. In the context of reporting of segment information in consolidated financial statements, the references in this Statement to any financial statement items should construed to be the relevant item as appearing in the consolidated financial statements. Pension calculations, for example, often are done for an enterprise as a whole, but the enterprise-wide figures may be allocated to segments based on salary and demographic data for the segments. The way in which asset, liability, revenue, and expense items are allocated to segments depends on such factors as the nature of those items, the activities conducted by the segment, and the relative autonomy of that segment. If an enterprise can compute segment net profit or loss or some other measure of segment profitability other than segment result, without arbitrary allocations, reporting of such amount(s) in addition to segment result is encouraged. Even if an enterprise must apply paragraph 25 because its internal segments are not along product/service or geographical lines, it will consider the next lower level of internal segmentation that reports information along product and service lines or geographical lines rather than construct segments solely for external reporting purposes. Similarly, a single geographical segment does not include operations in economic environments with significantly differing risks and returns. An enterprise should indicate the types of products and services included in each reported business segment and indicate the composition of each reported geographical segment, both primary and secondary, if not otherwise disclosed in the financial statements. Accounting Standard 5, ‘Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies’ requires that “when items of income and expense within profit or loss from ordinary activities are of such size, nature or incidence that their disclosure is relevant to explain the performance of the enterprise for the period, the nature and amount of such items should be disclosed separately”. Therefore, except in rare circumstances, an enterprise will report segment information in its financial statements on the same basis as it reports internally to top management. 01 July 2010 Accounting Standard (AS) 17, ‘Segment Reporting’, issued by the Council of the Institute of Chartered Accountants of India, comes into effect in respect of … 2. This is the case where the internal organization and management structure of an entreprise and its system of internal financial reporting to the top management are neither based on individual products or services nor on geographical areas. The standard is applied in presenting general purpose financial statements. If primary format of an enterprise for reporting segments information is business segments, it should also report the following information: (a) Segment revenue from external customers by geographical area based on the geographical location of its customers, for each geographical segments whose revenue from sales to external customers is 10 per cent or more of enterprise revenue; (b) The total carrying amount of segments assets by geographical location of assets, for each geographical segment whose segments assets are 10 per cent or more of the total assets of all geographical segments; and. Such disclosure is not intended to change the classification of any such items of revenue or expense from ordinary to extraordinary or to change the measurement of such items. Scope: For General Purpose Financial Statements or Consolidated Financial Statements. Appendix III to these statements illustrates the application of these disclosure standard. The definitions of segment revenue, segment expense, segment assets and segment liabilities include amounts of such items that are directly attributable to a segment and amounts of such items that can be allocated to a segment on a reasonable basis. AASB 114 does not apply to not-for- That does not mean, however, that the enterprise accounting policies are to be applied to reportable segments as if the segments were separate stand-alone reporting entities. In India Institute of Chartered Accountants of India has issued AS-17 which is being reproduced for the reference of the students. The impact of, and the adjustments resulting from, such change, if material, should be shown in the financial statements of the period in which such change is made, to reflect the effect of such change. Paragraphs 47-51 identify the disclosures required for secondary reporting format of an enterprise. The following is the text of Accounting Standard 17, ‘Segment Reporting’, issued by the Council of the Institute of Chartered Accountants of India. Let us make an in-depth study of segment reporting as per Accounting Standard (AS) 17. Such costs are part of segment expense if they relate to the operating activities of the segment and if they can be directly attributed or allocated to the segment on a reasonable basis. vi Deloitte A Roadmap to Segment Reporting (2020) 2.3.2.4 Budgeting Process 17 2.3.2.5 Compensation Structure 18 2.4 Discrete Financial Information 18 2.4.1 Revenue Information Provided to … Enterprises are encouraged to make all of the primary-segment disclosures identified in paragraphs 39-46 for each reportable secondary segment although paragraphs 47-51 require. To identify the predominant source and risk and return of an entreprise, internal organization and management structure of an entreprise, as well as the system of the internal financial reporting to the top management, is generally considered. if internal organisational and management structure of an enterprise and its system of internal financial reporting to the board of directors and the chief executive officer are based neither on individual products or services or groups of related products/services nor on geographical areas, the directors and management of the enterprise should determine whether the risks and returns of the enterprise are related more to the products and services it produces or to the geographical areas in which it operates and should, accordingly, choose business segments or geographical segments as the primary segment reporting format of the enterprise, with the other as its secondary reporting format. This approach of looking to organisational and management structure of an enterprise and its internal financial reporting system to identity’ the business and geographical segments of the enterprise for external reporting purposes is sometimes called the ‘management approach’, and the organisational components for which information is reported internally are sometimes called ‘operating segments’. (i) The portion of enterprise revenue that is directly attributable to a segment. 51. In such a case entreprise should also report the following segment information for each asset based geographical segment provided revenue from sales to external customers or segment assets are 10% or more of total entreprise amounts: © 2020 Copyright © Intuit India Software Solutions Pvt. Prohibited Content 3. In making that judgment, enterprise management takes into account the objective of reporting financial information by segment as set forth in this Statement and the qualitative characteristics of financial statements as identified in the Framework for the Preparation and Presentation of Financial Statements issued by the Institute of Chartered Accountants of India. An enterprise looks to its internal financial reporting system as the starting point for identified those items that can be directly attributed, or reasonably allocated, to segments. Determining the composition of a business or geographical segment involves a certain amount of judgment. In some cases, organisation and internal reporting of an enterprise may have developed along lines unrelated to both the types of products and services it produces, and the geographical areas in which it operates. The qualitative characteristics include the relevance, reliability, and comparability over time of financial information that is reported about the different groups of products and services of an enterprise and about its operations in particular geographical areas, and the usefulness of that information for assessing the risks and returns of the enterprise as a whole. shows that segment-reporting practices of these units have taken a new turn after the implementation of AS-17. Enterprises whose equity or debt securities are listed whether in India or outside India. Terms and conditions, features, support, pricing, and service options subject to change without notice. INDAS 108 3. 13. If the segment result of a segment includes interest or dividend income, its segment assets include the related receivables, loans, investments, or other interest or dividend generating assets. 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